Commissioner Of Income Tax vs Auto Lamps Ltd.
2005 Latest Caselaw 725 Del

JUDGMENT

Swatanter Kumar, J.

1. The assessed filed the return declaring loss of Rs. 9,62,033/- for the assessment year 2001-02 on 31.10.2001. The authorities took up the case of the Petitioner for scrutiny under Section 143(2)(i) of the Income Tax Act (hereinafter referred to as the `Act') and served a notice upon the assessed. The assessed was duly represented during the assessment proceedings in which the assessed filed a revised return along with a copy of the challan. In the covering letter, the assessed stated that the amounts were mentioned in the Audit Report but the same had not been paid. However, due to oversight the same was overlooked. Vide assessment order dated 6.2.2003 the Assessing Officer declined to accept the contention of the assessed and noticed that the assessed company had made provisions of Rs. 10,56,540/- on account of PF, Pension Fund, EFIC and Bonus but did not make the payments nor added back the same in its income in terms of Section 43(B) of the Income Tax Act. Consequently, he directed that penalty proceedings under Section 271(1)(c) of the Act in furnishing inaccurate particulars of income have been initiated separately and held that the declared income of Rs. 104510/- in the revised return was accepted. The Assessing Officer also directed issuance of demand notice and challan charging interest under Section 234(a), 234(b) and 234(c).

2. Against this order the assessed filed an appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority held as under :

"During the appellate proceedings, the appellant has claimed that in view of the decision of Delhi High Court in the case of CIT v. Ram Commercial Enterprises 246 ITR 568, the penalty under Section 271(1)(c) cannot be levied as the Assessing Officer has not recorded his satisfaction in the body of assessment order. The appellant has also relied on some other decisions which are not on comparable facts and therefore, not much relevant.

I have considered the issue carefully. The addition on account of EPF, ESIC etc. have been highly debatable. Levy of penalty on debatable addition specially in view of the decision of Delhi High Court in the case of Ram Commercial Enterprises v. CIT 246 ITR 571 does not appear to be legally correct. The penalty is, therefore, deleted.

In the result, the appeal is allowed."

3. The above order of the Appellate authority dated 29.3.2004 was challenged by the Income Tax Officer-II, New Delhi before the Income Tax Appellate Tribunal, Delhi Bench which was also dismissed by the Tribunal. The Tribunal affirmed the judgment of the First Appellate Authority on fact and law both. It was categorically stated that no satisfaction has contemplated under the provisions of Section 271(1)(c) as has been recorded by the Assessing Officer while complying the assessment. The challenge in the present appeal is to this order of the Appellate Tribunal. The learned counsel appearing for the Department while relying upon the judgments of this Court in the case of CIT v. Ram Commercial Enterprises 246 ITR 568, argued that the concurrent view taken by the First Appellate Authority and the Tribunal both are suffered from patent error of law and the Assessing Officer was not required to record any detailed reasons and it was sufficient for him to say that the penalty proceedings be initiated. On this premises it is contended that the order should be set aside and present appeal be admitted as it raises substantial question of law for consideration of the Court. We find no merit in this contention. In the judgment of CIT v. Ram Commercial Enterprises (supra), the Court specifically held a bare reading of the provisions of Section 271 and the law laid down by the Supreme Court makes it clear that it is the Assessing Authority who has to form his own opinion and record his satisfaction before initiating penalty proceedings. Merely because the penalty proceedings have been initiated it cannot be assumed that such a satisfaction was arrived at this clearly enunciated principle which has been reported in the recent judgment of this Court in the case of Commissioner of Income Tax v. B.R.Sharma, ITA 340 of 2003 decided on 3.2.2005 which can be properly referred at this stage.

4. The bare reading of the above order passed by the Assessing Officer on 6.2.2003 shows that there is no application of mind and no opinion has been formed and no satisfaction has been recorded by the Assessing Officer before or at the time of initiating penalty proceedings. In fact, in the impugned order it is recorded that penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of the income had been initiated separately. This itself shows that without even mentioning the essential ingredients which the Assessing Officer is obliged to record for initiation of penalty proceedings, the impugned order was passed to pass an order initiating penalty proceedings while passing the assessment order in a routine manner would be an apparent violation of the relevant provisions. In our opinion, the impugned order clearly suffers from the infirmity of non application of mind. The Assessing Officer had failed to record requisite satisfaction in consonance with the settled principles of law.

5. In these circumstances, we see no reason to interfere with the concurrent view taken by the First Appellate Authority and the Income Tax Appellate Tribunal. In our view, no question of law arises for consideration of the Court in the present appeal and the same is dismissed while leaving the parties to bear their own costs.